Undocumented pay more in state and local taxes

A new study shows that undocumented immigrants in the United States pay considerably more than the general population in state and local taxes, yet would pay even more if they were given legal status.

The study, authored by Lisa Christensen Gee, Matthew Gardner and Meg Wiehe, was sponsored by the Institute on Taxation and Economic Policy in Washington D.C. It is not the first study of its kind, but it updates the information on immigrant tax payments and breaks it down state by state. In an election year during which attacks on immigrants as spongers and criminals are going to be a major campaign theme, this is useful information to have on hand.

In general, undocumented immigrants are shown to be paying billions of dollars into state and local governments’ coffers. Taxes paid include all kinds of fees, sales and excise taxes, and, very importantly, property taxes, whether directly on property that the immigrants own, or indirectly through the rent they pay (in case anyone did not know it, landlords calculate their tenants’ rent in such a way as to cover their own property taxes).

So at present, the study’s authors estimate that undocumented immigrants pay each year $11,643,936,000 to state and local governments. Moreover, they do not have access to many government services that U.S. citizens and most permanent legal resident non-citizens do, including various types of public assistance including food stamps, government sponsored college scholarships Medicare-Medicaid and the like. The Supreme Court decision Plyer vs. Doe assured undocumented children the right to attend elementary and secondary school. Texas had argued against this decision; the judges split 5 to 4 in rendering their judgment.

If all or almost all undocumented immigrants were to achieve legal status in this country, their annual state, local and county tax payments would rise to $13,770,107,000. Thus legalization of the undocumented would bring $2,126,171,000 into state and local tax departments.

These estimates are based on the fact that if undocumented immigrants were legalized, they would have access to better jobs with more income and thus would bring more money into the economy, including tax payments of various kinds. 

The study does not go into the “why” of the improved income, but it is not hard to imagine the reasons. People with secure legal status in the country would be in a better position to look for better jobs if they were not satisfied with their pay, benefits or working conditions. And they would have a much easier time joining labor unions without fear that this would lead to their exposure as undocumented and consequent deportation. My own guess is that the estimated gains in tax revenue given in this study would turn out to be lowball estimates.

Currently, the immigrants’ rights movement is waiting for a Supreme Court decision on President Obama’s 2014 executive order to expand the DACA (Deferred Action for Childhood Arrivals) program to include more young people, and to implement the DAPA (Deferred Action for Parents of Americans) program, which would give tentative legal status and work permits to undocumented parents of U.S. citizens and legal permanent resident non-citizens. Twenty-six Republican attorneys general filed suit in 2015 to block the implementation of expanded DACA and DAPA, on the grounds that these programs would cost the states more money because they would have to give drivers’ licenses to many of these immigrants. A district court judge in Texas froze the whole DAPA program and the expansion of DACA in response to this suit. The Obama administration appealed this all the way up to the Supreme Court which is expected to render a judgment on the case any day now.

So it is important to see how DACA and DAPA would impact state, county and local tax revenues, and the study goes into that. The study’s authors conclude that even though the executive orders do not cover even half of the undocumented immigrants in this country, they would make a positive contribution to these tax revenues, to the tune of $805,204,000.

Only 26 states are part of the lawsuit. Two of the biggest complainers about the supposed burden of affording legal status to the undocumented have been the Republican political establishment in the state of Texas, and Republican politicians, currently out of power, in Virginia. 

The estimates produced by this study show that both of those states would substantially increase their state, local and county revenues if the expanded DACA and DAPA programs were given the green light by the Supreme Court. Texas would rake in an extra $58,946,000 and Virginia an extra $25,843,000. 

Federal tax revenues would also increase, though this study did not encompass the federal level. As it is, many undocumented immigrants do manage to pay federal income taxes either with fake Social Security numbers or special Tax Identification numbers. But with full legalization, the compliance level would go up considerably. This would help state income tax revenues a lot, also.

The study authors add another datum: Nationally, undocumented immigrants pay an average of 8 percent of their incomes in state and local taxes. Meanwhile, the top one percent of incomes in the country pay just 5.4 percent.

So, one might ask: who are the real spongers?

Photo: Flickr (CC)




Emile Schepers
Emile Schepers

Emile Schepers is a veteran civil and immigrant rights activist. Born in South Africa, he has a doctorate in cultural anthropology from Northwestern University. He is active in the struggle for immigrant rights, in solidarity with the Cuban Revolution and a number of other issues. He writes from Northern Virginia.